Correlation Between Mercury Systems and Woodward
Can any of the company-specific risk be diversified away by investing in both Mercury Systems and Woodward at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mercury Systems and Woodward into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercury Systems and Woodward, you can compare the effects of market volatilities on Mercury Systems and Woodward and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mercury Systems with a short position of Woodward. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercury Systems and Woodward.
Diversification Opportunities for Mercury Systems and Woodward
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mercury and Woodward is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Systems and Woodward in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodward and Mercury Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mercury Systems are associated (or correlated) with Woodward. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodward has no effect on the direction of Mercury Systems i.e., Mercury Systems and Woodward go up and down completely randomly.
Pair Corralation between Mercury Systems and Woodward
Given the investment horizon of 90 days Mercury Systems is expected to under-perform the Woodward. In addition to that, Mercury Systems is 1.54 times more volatile than Woodward. It trades about -0.01 of its total potential returns per unit of risk. Woodward is currently generating about 0.08 per unit of volatility. If you would invest 10,152 in Woodward on August 27, 2024 and sell it today you would earn a total of 7,453 from holding Woodward or generate 73.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercury Systems vs. Woodward
Performance |
| Timeline |
| Mercury Systems |
| Woodward |
Mercury Systems and Woodward Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercury Systems and Woodward
The main advantage of trading using opposite Mercury Systems and Woodward positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercury Systems position performs unexpectedly, Woodward can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Woodward will offset losses from the drop in Woodward's long position.| Mercury Systems vs. Curtiss Wright | Mercury Systems vs. Hexcel | Mercury Systems vs. Ducommun Incorporated | Mercury Systems vs. Woodward |
| Woodward vs. Hexcel | Woodward vs. Ducommun Incorporated | Woodward vs. Mercury Systems | Woodward vs. AAR Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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